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Energy Tomorrow Blog

Weak Investment and Implications for Global Supply

investments  global energy  oil supply 

Dean Foreman

Dean Foreman
Posted September 17, 2021

Global oil and natural gas investments have fallen to record lows so far in 2021, as we recently discussed here. Yet, demand for both has risen alongside the economic recovery. Consequently, supplies haven’t kept pace with demand, and the mismatch between the two propelled gasoline and natural gas prices this summer to their highest levels since 2014.

 

In fact, global natural gas prices set a record-high for summer months as demand outdistanced supply.  Oil prices eased in August following a 16% run-up over the previous three months for Brent crude oil, but were back above $70 per barrel in mid-September.

 

Although economic and pandemic-related uncertainties and expected OPEC+ output increases have also likely impacted prices, the lack of investment for oil and natural gas production is an ominous sign, given that major conventional global oil and natural gas projects can take years to start producing. We could be in for global oil market tightening in 2022 and further upward pressure on prices, with prices already at their highest level since 2014.

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Digging Into the Administration's Lease Sale Announcement

federal leases  white house  offshore oil production  us energy security 

Mark Green

Mark Green
Posted August 27, 2021

The Biden administration’s plan to hold its first ever oil and natural gas lease sales this year is a positive sign after it paused new leasing on federal lands and waters for nearly seven months. The question is whether this is a significant policy shift for the administration, which will be determined by what actually happens and how swiftly it occurs.

It must be remembered that it has been more than two months since the administration was ordered to lift its leasing pause by a federal judge, and the administration is continuing its appeal of the court’s ruling. Again, it’s fair to ask whether this week’s announcement is a policy change – or something else while the legal case continues?

The answers to that question and others are critically important to future oil and gas development in federally controlled reserves, much of which requires sizeable investment and lengthy planning. 

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Afghanistan, Uncertainty and Ensuring U.S. Energy Security

global markets  us energy security  domestic oil production 

Mark Green

Mark Green
Posted August 24, 2021

The continuing story in Afghanistan is a reminder of how suddenly geopolitical events turn. Stability in the world is fleeting, and we know that global turbulence impacts energy, historically triggering oil price volatility. While the U.S. shale revolution helped keep global oil markets and costs stable, shielding American consumers from many of the impacts caused by destabilizing events in recent years, maintaining and increasing U.S. energy security should never cease to be a top national priority.

American energy security is strengthened by safe and responsible oil and natural gas production here at home. The two supplied nearly 70% of the energy Americans used in 2020, according to the U.S. Energy Information Administration (EIA). And natural gas was the leading fuel for generating electricity, EIA says, with a share nearly four times as large as wind and solar combined.

Now, Afghanistan is raising concerns that could roil global trade, including oil markets. 

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Sorry, America: OPEC+ Oil Rebuff Keeps Focus on Flawed White House Energy Policies

white house  domestic oil production  us energy security  federal leases 

Mark Green

Mark Green
Posted August 19, 2021

We’ve entered a different era in America, one in which this nation, rich in oil and natural gas reserves, publicly begs OPEC+ to increase its crude oil production to offset a U.S. supply-demand imbalance and the highest gasoline prices in years.

Let that sink in: Practically on bended knee, the American president and his administration – leading the world’s No. 1 producer of oil and natural gas – have pleaded with an oil cartel to solve their problem by producing more oil – as they bypass U.S. producers and pursue anti-oil policies here at home. …

Insult to injury: OPEC+ said, sorry, America, we see no reason to meet your request.

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The White House, OPEC and the Need for Domestic Oil Production

president  opec  federal leases  domestic oil production 

Dean Foreman

Dean Foreman
Posted August 16, 2021

Some observations follow on the Biden administration’s continued call for OPEC to increase its crude oil production – even as it curbs or discourages U.S. production – plus the president’s recent announcement  that he wants the Federal Trade Commission (FTC) to investigate summer gasoline prices.

We’ll take the FTC first. Chair Lina Khan has been asked to look into any potential illegal conduct or anti-competitive practices that may have occurred during the summer driving season.

The U.S. Energy Information Administration (EIA) reported the national average for gasoline reached $3.172 per gallon Aug. 9, the highest point since October 2014. “[T]here have been divergences between oil prices and the cost of gasoline at the pump,” wrote National Economic Council Director Brian Deese. “While many factors can affect gas prices, the president wants to ensure that consumers are not paying more for gas because of anti-competitive or other illegal practices.”

Numerous federal and state agencies have investigated the causes of price spikes for decades and consistently have found that the markets and other factors are responsible for price fluctuations. If the White House truly believes “anti-competitive or other illegal practices” have elevated gasoline prices, it’s strange that it would look to a cartel of oil-exporting countries to help solve the problem. In fact, the administration is floating a false premise on what’s happened this summer with gasoline prices.

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We Need More U.S. Oil, Not an Import-More-Oil Strategy

president  opec  crude oil production  gasoline prices  consumers 

Mark Green

Mark Green
Posted August 11, 2021

The White House has big problems with its continued calls for more crude oil production from OPEC – even as it is discouraging U.S. production.

Rising domestic gasoline prices are a political problem for President Biden. … The administration’s political dilemma is that since April 2020, when EIA reported the per-gallon cost of gasoline was $1.938, prices rose to $3.231 last month. The safe assumption is that most Americans have noticed the 66.7% increase at the pump.

The White House response last month was to plead with OPEC to produce more crude oil – and that’s because the cost of crude oil is the No. 1 factor in the retail cost of gasoline. More supply means more downward pressure on crude costs and retail prices.

On Wednesday, President Biden doubled down on the approach, saying the administration wants OPEC to reverse production cuts made during the pandemic to lower prices for consumers. … Therein lies a big energy policy problem.

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Higher U.S. Gasoline Prices Reflect Crude Oil Supply-Demand Imbalance

domestic oil production  federal leases  supply  white house 

Lem Smith

Lem Smith
Posted August 5, 2021

This summer, Americans saw gasoline prices rise to their highest level since 2014 as Congress debated infrastructure policy and economies worldwide continued their recovery.

Gasoline prices primarily reflect the local balance between gasoline supply and demand. Notably, the cost of crude oil is the largest component in the price of regular gasoline, accounting for 55% of the per-gallon cost, according to the U.S. Energy Information Administration. Right now, demand for crude oil is outpacing supply across the U.S. ...

Given these conditions, it’s no time to restrict or discourage U.S. natural gas and oil production. Instead, government and industry should work together to expand the safe and responsible development of American energy resources. Unfortunately, while America’s natural gas and oil are in high demand, the Biden administration has advanced misguided policies that could exacerbate the crude imbalance and further affect consumers.

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Study: Industry’s Broad Shoulders Support U.S. Economic Recovery

jobs  economic growth  gdp  oil and natural gas jobs 

Mark Green

Mark Green
Posted July 20, 2021

Natural gas and oil are the energy foundation for U.S. economic growth, job creation and the opportunity for Americans to prosper all across the country. This is seen in a new analysis of our industry’s economywide and countrywide impacts11.3 million jobs supported in 2019 across all 50 states and the District of Columbia – generating 3.5 additional jobs elsewhere in the economy for each direct industry job, accounting for 5.6% of total U.S. employment; supported nearly $1.7 trillion to U.S. gross domestic product, or nearly 8% of the national total; supported nearly $900 billion in labor income or 6.8% of U.S. national labor income.

The analysis by PwC commissioned by API is based on the latest available government data (2019). Like other industry and business sectors, our industry was hard hit by the economic effects of the 2020 pandemic, but the 2019 data – generated during a period of robust U.S. growth, indicates the importance of the natural gas and oil industry post-pandemic, as the U.S. and global economies and petroleum demand ramp up. The U.S. Energy Information Administration projects (EIA) that 2022 global oil and liquid fuels demand will eclipse 2019 levels.

Given EIA’s forecast, it’s critically important that national policy supports – and doesn’t hinder – domestic natural gas and oil production.

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Good News: Permitting … Uncertain News: Leasing

permitting  federal leases  oil and natural gas production  us energy security 

Mark Green

Mark Green
Posted July 15, 2021

As we await the Biden administration’s report on the federal natural gas and oil leasing program, let’s note the welcome news that oil and gas permitting approvals this year are on track to reach their highest levels since George W. Bush was president.

Permitting at that pace is good for near-term U.S. production, no question. In January, when the administration suspended new oil and gas leasing on federal lands and waters, it said permitting would continue, and it has. The country benefits from safe, responsible and robust domestic natural gas and oil production.

Americans shouldn’t conflate permitting and leasing. Drilling permits are issued when companies are ready to develop from acreages, onshore and offshore, previously leased from the federal government. Put another way, leases typically are secured years before development occurs. We’re seeing permits go through at a significant rate because investment and planning have been completed and acreages are ready to go into production. Permitting is about production that’s imminent; leases represent energy in the future.

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U.S. Mostly a Spectator While Others Address Supply-Demand Pinch

opec  white house  oil and natural gas production  supply  demand 

Mark Green

Mark Green
Posted July 8, 2021

The Biden administration says it is keeping a close eye on the OPEC+ talks on crude oil production because, as White House Press Secretary Jen Psaki said, it wants “Americans to have access to affordable and reliable energy at the pump.”

Unfortunately, the U.S. is mostly a spectator as OPEC+ debates crude oil supply, which continues to be outpaced by demand, putting upward pressure on crude costs. Because the cost of crude is the biggest factor in gasoline prices, U.S. pump prices have reflected this mismatch between demand and supply. 

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